DP World Profit May Double on Expanded Port Network: Week Ahead

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2008 Aug 25

DP World Ltd., the world's fourth- largest port operator, may this week report first-half profit doubled on African acquisitions and greater handling capacity at its Dubai hub even as the world's biggest economies slow. The 45-terminal operator's net income may reach $244.3 million when it reports Aug. 28, according to the average estimate of three analysts surveyed by Bloomberg. The Dubai state-controlled firm said its profit for the same period in 2007 was $111.2 million before separately disclosable items. "The company's first-half growth is driven by an increase in cargo handling, especially in Jebel Ali, and acquisitions in Africa and Saudi Arabia," analyst Muneeba Kayani at Morgan Stanley said in an e-mail. The Dubai-based analyst has an "equal-weight" recommendation on the stock.

Dubai is spending billions of dollars on finance, tourism and infrastructure projects to cut its dependence on oil revenue and build the emirate into a new global hub. DP World's $4.96 billion-public share sale in November, the Middle East's largest, has left investors disappointed as its shares have dropped 35 percent to $0.85 since listing on the Dubai International Financial Exchange Ltd. in November.

DP World last month reported container volume jumped 21 percent in the first half, helped by growth in India and the Middle East.

In 2007 the United Arab Emirates company gained control of Egypt's Sokhna Port at the southern entrance to the Suez Canal, its third on the Red Sea after Jeddah in Saudi Arabia and Djibouti, East Africa. This year it plans to raise the capacity of its base at Jebel Ali port by more than a quarter.

`Rapid Growth'

"DP World operates in regions that are expected to witness a rapid increase in utilization rates and shortage in capacity," Kareem Murad, a Dubai-based analyst at Shuaa Capital PSC who recommends buying the stock, said in an e-mail. "This means margins will improve significantly reflecting positively on the company's earnings."

The port operator now has terminals in 29 countries from Senegal to China, whose economy expanded 11.9 percent this year. The U.A.E. economy will expand 7 percent this year, according to a Bloomberg survey.

A year since the U.S. housing slump sparked about $500 billion in credit market losses for banks globally, the world's largest economies are all stumbling as rising borrowing costs combine with record commodity prices to sap growth. The U.S. is close to a recession and the economies of France, Germany and Japan all contracted in the second quarter.

At the 25 terminals where DP World is majority owner or has management control, volume rose 21 percent to 13.6 million 20- foot containers in the first half. Hong Kong's Hutchison Port Holdings Ltd., Singapore's PSA International Pte. and A.P. Moeller-Maersk of Denmark are DP World's main competitors.

Markets Last Week

Five of the seven Gulf stock indexes tracked by Bloomberg declined last week. The Dubai Financial Market General Index fell 2.5 percent as did the Bahrain All Share Index, losing 2 percent. Saudi Arabia's measure advanced 3.4 percent, while Oman's index rose 1.6 percent.

Tamweel PJSC, the United Arab Emirates' largest mortgage provider, dropped 5.4 percent, ending the week at 5.78 dirhams. The shares fell to the lowest close since Nov. 4 even after the company denied it's being investigated by Dubai police in a probe that resulted in the arrest of its former Chief Executive Officer Adel Al Shirawi and former head of investments Feras Kalthoum.

Agility retreated 5.2 percent to 1,100 fils, the lowest since July 14. The Middle East's largest storage and logistics operator on Aug. 14 said second-quarter profit fell 9 percent to 35.1 million dinars ($131 million).

The following is a list of events in the Gulf this week:
Aug. 25: Qatar Fuel (QFLS QD) plans to hold a press conference to address questions on its second-quarter results. Aug. 27: Barwa Real Estate (BRES QD) will hold an analyst meeting to discuss 1H earnings. Aug. 31: In the Muslim world the holy month of Ramadan is likely to start today, depending on the sighting of the moon.

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